EE590 Transmission Planning Projects and Cost Allocation

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EE590Transmission Planning Projects and Cost
Allocation

• Ming NI
• Economic Studies, Midwest ISO

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Transmission Planning Projects

• Reliability Projects
• Identified either in the periodically
  performed Baseline Reliability Study, or in
  Facilities Studies associated with the request
  processes for new transmission access.
• Baseline Reliability Projects Network upgrades
  identified in the base case as required to ensure
  that the Transmission System is in compliance
  with applicable reliability standards.
• Transmission Access Projects
• Generation Interconnection Projects
• Transmission Delivery Service Projects

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Transmission Planning Projects

• Economic Project (Regionally Beneficial Projects)
• Bring economic benefits to the region. Need
  to pass the Benefit/Cost test.

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Why Cost Sharing

• FERC Order 890 issued in early 2007
• Require compliance with nine principles
• Coordination
• Openness
• Transparency
• Information Exchange
• Comparability
• Dispute Resolution
• Regional Participation
• Economic Planning Studies, and
• Cost Allocation

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MISO Reliability ProjectCost Allocation(RECB I)
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RECB I Principles

• Load growth driven projects in one zone (utility)
  can benefit users in another
• Lower voltage projects have more localized
  benefits than higher voltage - especially within
  a large geographic area RTO
• Higher voltage projects have at least some effect
  on all grid users but large geographic area of
  RTO must be considered
• New generator driven transmission projects are
  in-part caused by the generator, but in-part
  benefit more than just the generator or his
  customer
• New transmission for specified transmission
  service use (point to point requests) can be
  targeted to the requesting customer

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BRP Project Cost Allocation

• BRP Allocation mechanism
• 345 kV and above
• 20 of cost Postage Stamped across footprint
• 80 allocated to specific zones based on relative
  impact of project on zones
• Measure of impact is sum of Line Outage
  Distribution Factor (LODF)Line Length on all
  other lines (branches) in MTEP model
• Below 345 kV and above 100 kV
• 100 allocated to specific zones based on
  relative impact of project on zones
• Measure of impact is sum of Line Outage
  Distribution Factor (LODF)Line Length on all
  other lines (branches) in MTEP model

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TAP Project Cost Allocation

• Generator Interconnection Projects
• 50 allocated to Interconnection Customer
• 50 allocated to zones by same mechanism as BRP
• Point-to-point Transmission Service Projects are
  directly assigned to requesting customer

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MISO Economic ProjectIdentification and Cost
Allocation(RECB II)
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Qualifying Tests

• Project Cost gt 5 million
• And project voltage is gt 345 kV
• And the project is not exclusively a Baseline
  Reliability Project or a New Transmission Access
  Project
• If a project is both a BRP and a RBP, allocated
  as RBP

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Benefit Metric

• Benefit Metric is calculated on region level
  (MISO East, Central and West Region).
• For each hour, calculate the regions Load Cost
  Saving, and regions Adjusted Production Cost
  Saving.
• Regions Load Cost Saving is the change in load
  energy payment (Load Load LMP)
• Regions Adjusted Production Cost Saving is the
  change of Regions Adjusted Production Cost,
  which equals
• Regions Production Cost (fuel costs, variable
  OM costs and emissions costs)
• Regions Purchase Region Load Weighted LMP
  (if it purchase at that hour)
• - Regions Sale Region Generation Weighted LMP
  (if it sales at that hour)
• Regions Annual Benefit 70 Regions Annual
  Adjusted Production Cost Saving 30 Regions
  Annual Load Cost Saving

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Study Year

• MISO Tariff Language
• minimum of 10 years of benefits with a maximum
  20 year horizon model
• For a project with ISD of 2011, we will run
  PROMOD for the in service year (2011), 5 years
  after (2016) and 10 years after (2021). For the
  years between, these 3 years, we will use the
  linear interpolation based 3 years values.

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Benefit/Cost Ratio

• Present value of MISOs annual benefit (sum of
  regions) for the first 11 years (2011 to 2021 if
  ISD is 2011) of project life compared to present
  value of annual project cost for first 11 years
  of project life
• The threshold B/C ration increases linearly with
  the time until planned in-service date.

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Cost Allocation

• Twenty percent (20) of the Project Cost of the
  Regionally Beneficial Project shall be allocated
  on a system-wide basis to all Transmission
  Customers and recovered through a system-wide
  rate.
• Eighty percent (80) of the costs of the
  Regionally Beneficial Projects shall be allocated
  on a sub rgion-wide basis to all Transmission
  Customers in each of the three defined Planning
  Sub Regions. The region with negative total NPV
  benefit will not share any portion of these 80
  cost.
• Example 1
• Total NPV Benefit East M100
  Central M200, West M300
• Then Cost Allocation East 16.67,
  Central 33.33, West 50
• Example 2
• Total NPV Benefit East M-100
  Central M200, West M300
• Then Cost Allocation East 0,
  Central 40, West 60

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PJM Reliability ProjectCost Allocation
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Cost Allocation Method

• For projects gt 500 kV
• 100 of project cost is regionally allocated to
  PJM zones based on load-ratio share
• For projects lt 500 kV
• Use the DFAX (Distribution Factor) Method

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Basic Concepts

• DFAX
• DFAX (After-shift power flow pre-shift power
  flow) / Total amount of power shifted
• Total amount of power shifted Modeled
  incremental megawatt transfer to a given Load
  Deliverability Area
• Pre-shift power flow Megawatt flow over the
  constrained transmission element before the
  incremental megawatt transfer
• After-shift power flow Megawatt flow over the
  constrained transmission element after the
  incremental megawatt transfer
• Capacity Emergency Transfer Objective (CETO)
• Transfer limitation into the LDA.

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Example
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Example (Cont)
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Example (Cont)
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Example (Cont)
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Example (Cont)
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PJM Economic ProjectIdentification and Cost
Allocation
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Process Overview

• Annual Benefit Metric
• Annual Benefit (.7)(?System Production
  Cost)(.3)(?Load Energy Payment)
• ?System Production Cost is change in system
  generation variable cost (fuel costs, variable
  OM costs and emissions costs) associated with
  total PJM energy production
• ?Load Energy Payment is change in net load energy
  payment (change in gross load payment minus
  change in transmission right credit)
• For projects that have costs allocated regionally
  (500 kV and up), the load energy payment for all
  PJM zones is considered
• For projects that have costs allocated using a
  flow-based methodology (below 500 kV) , the load
  energy payment for only those PJM zones that show
  a decrease in load energy payment is considered

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Process Overview (cont.)

• Simulation/Model Details
• Annual market simulations made with and without
  upgrade for future years 1, 4, 7 and 10 (current
  year (cy), cy3, cy6 and cy9)
• Annual benefits within the 10-year time frame for
  years which were not simulated interpolated using
  these simulation results
• Annual benefits for years beyond the 10-year
  simulation time frame based on an extrapolation
  of the market simulation results for years 1, 4,
  7 and 10
• A higher-level annual market simulation made for
  future year 15 (cy14) to validate the
  extrapolation results and extrapolation of annual
  benefits for years beyond the 10-year simulation
  time frame may be adjusted accordingly

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Process Overview (cont.)

• Cost/Benefit Analysis
• Present value of annual project benefit for first
  15 years of project life compared to present
  value of annual project cost for first 15 years
  of project life
• Project is considered economic and included in
  RTEP if B/C ratio exceeds 1.251

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Example of Benefit Calculation for Single Year
Annual Benefit Metric Calculation Benefit
(.7)(153.3M) (.3)(-83.4) 82.3M
(for 500 kV and above) Benefit
(.7)(153.3M) (.3)(784,7) 342.7M
(for below 500 kV)
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Example of Benefit Calculation for Single Year
(cont.)
Note On a total system basis, Delta Net Load
Payment Delta Gross Gen Revenue and Delta
Congestion Costs Delta FTR Credits therefore
explicit calculation of FTR credits is not
necessary in order to determine Delta Net Load
Payments for entire system.
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Annual Benefit Extrapolation
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Annual Benefit / Annual Costs
C/B analysis uses 15 years of project costs and
benefits starting with project in-service year
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NPV Analysis

• Present value of annual project benefit for first
  15 years of project life compared to present
  value of annual project cost for first 15 years
  of project life
• Project is considered economic and included in
  RTEP if B/C ratio exceeds 1.251

B/C Ratio 1,731 / 1,039 1.66 gt 1.25
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Cost Allocation Method

• For projects gt 500 kV
• 100 of project cost is regionally allocated to
  PJM zones based on load-ratio share
• For projects lt 500 kV
• Use the DFAX (Distribution Factor) Method

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Cost Allocation Example
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Cost Allocation Example (Cont)
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Cost Allocation Example (Cont)
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Cost Allocation Example (Cont)
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Cost Allocation Example (Cont)
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Cost Allocation Example (Cont)
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Cost Allocation Example (Cont)